IMF bailout promises much-needed relief, but for Sri Lanka and its people there will be more pain

Sri Lanka’s provisional agreement with the International Monetary Fund for a rescue plan of 2.9 billion dollars is not a day too soon, although the agency’s board has yet to give its final go-ahead, and the more difficult task of persuading the country’s various creditors to restructure its debts is a condition prior to aid. As one of the bilateral creditors, India has already sounded the first alarm bells by demanding “equality of creditors” and “transparency”, a veiled warning against preferential treatment to China. So far, Beijing has not committed to joining the multilateral restructuring talks, which Japan has offered to host and initiate on Sri Lanka’s behalf. As the world’s largest bilateral lender, China’s record on debt restructuring suggests it prefers to go it alone. In the interests of Sri Lanka, it is to be hoped that all creditors will approach these negotiations in a spirit of cooperation.

There will be more pain as Sri Lanka implements the domestic economic measures agreed with the Fund. In his August 31 interim budget, President Ranil Wickremesinghe, who is also finance minister, outlined measures the nation will need to adopt: more and higher taxes, the sale of assets such as the national carrier and the privatization of the electricity board. and the state oil company. The unions are protesting against these measures, which include a lowering of the retirement age. Those who had argued that the collapse was an opportunity to correct an imbalanced and inequitable pattern of economic development outside IMF formulas – this is the agency’s 16th intervention in Sri Lanka – predict that solutions to short term that cause so much difficulty are not the solution. Wickremesinghe’s ability to get the people on his side will be crucial, but it will be a difficult task for a politician whose party failed to win a single seat in the 2020 parliamentary elections and whose presidency is backed by Sri Lankan Podujana Peramuna, the party of ousted and still despised Rajapaksas.

This is why the Sri Lankan president has been trying to form a multi-party government since taking office on August 2. So far, his outreach and impassioned plea in his budget speech asking opposition parties to join the government in order to free the country from its dependence on foreign loans so that stronger economies stop using it” as a tool of interference”, did not convince any of his opponents. In Sri Lanka, the road ahead is still long and difficult.

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